Lower prices driving gold demand in Qatar…

Different patterns of necklaces are on display at a jewellery showroom in Doha. Jewellery sales in the country registered an increase in October and November due to Eid al-Adha. Festive buying during Diwali, which is celebrated in many countries, also boosted demand. Gulf Times

A nearly 28% fall in gold price this year has driven consumer demand even as the yellow metal is expected to see more downside pressure due to improving economic climate in the region and elsewhere.

Gold, which stood at $1,700 for an ounce in January, slipped to nearly $1,200 this month mainly due to reports that the US economy is back on track.

The US recovery would bring an end to Federal Reserve’s Quantitative Easing (QE) that made the precious metal an important economic hedge.

Since the QE programme started in 2008, the bullion price has more than doubled, and only in the past 12 months has it significantly slipped.

“We clearly see an advantage in lower gold price,” said AJ Joju, regional manager at Joyalukkas Jewellery in Doha. “The local market gained between April and June this year when the gold price dropped from $1,600 to $1,400 an ounce,” he said.

Gold closed at QR139 for 22-carat and QR149 for 24-carat while ten tolas (116gm) ended trading at QR17,380 (retail selling price) yesterday.

But another analyst said demand for gold would hinge on dollar movements in the coming months.

“Generally, a drop in demand for the yellow metal is seen whenever the dollar strengthens. Saving currency, which fetched more in exchange value, might then become a better option for discerning investors,” he said.

Many Gulf currencies including Qatari riyal are pegged to the dollar.

Another factor that may impact gold trade would be “consumer sentiment”, he said.

“Consumer sentiment improves with economic climate. When economic climate becomes uncertain, many consumers either build on their savings or hold off on purchases,” he said.

Jewellery sale across outlets in the country registered an increase in October and November due to Eid al-Adha. Festive buying during Diwali, which is celebrated in many countries, also boosted demand.

In the local market, greater demand is seen more for finished jewellery such as necklace than gold bars or coins.

Despite a drop in gold prices in the last one year, the yellow metal has still retained its “investment potential”.

For many investors, gold is a “safe haven”.

A few years ago, people bought gold on a need-to basis, for weddings or special occasions when they really have to.

Local jewellers mostly meet the ‘extra bullion demand’ with supplies from Dubai, which is the region’s largest gold market. They get fresh stocks from the emirate every fortnight.

A recent Reuters’ dispatch said bullion was on track to end the year down nearly 30% at a six-month low below $1,200 an ounce and some forecasters said the market could break under the April 2010 bottom of below $1,050 in 2014.

For the year, bullion is down 28%, putting an end to a 12-year-gold rally.

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